Recovery hopes knocked by industry and building setback

Recovery hopes suffered a double setback today as Britain’s builders were hit with “a shocker” of a decline and the industrial sector stagnated in November, official figures showed today.

The latest statistics come in a week in which Chancellor George Osborne warned that the UK’s economic fightback still “has a long way to go”. They are also at odds with much more upbeat recent survey data.

Construction output fell 4% over the month, while growth stalled among manufacturers and the wider production sector, according to the Office for National Statistics (ONS).

The figures disappointed City economists, who said hopes of 1% growth or more in the final quarter of 2013 now look distant. ING Bank’s James Knightley said: “It suggests fourth-quarter GDP is likely to come in just below 1% rather than just above.”

The data comes amid calls in some quarters for the Bank of England to raise interest rates when unemployment, falling sharply at the moment, reaches 7%. David Kern, chief economist at the British Chambers of Commerce (BCC), said: “It is a timely reminder that the recovery is not yet secure, and should also dampen the clamour for an early rise in interest rates.”

Both construction and manufacturing are still well below pre-recession peaks. The Chartered Institute of Purchasing & Supply’s industry survey for November had signalled rapid expansion over the month, fuelling expectations of much stronger growth. Rob Wood, UK economist at Berenberg, said: “The hard data is not keeping pace with the red-hot business surveys... Industrial output today disappointed consensus expectations, but the real shocker was construction.”

The sector’s 4% slide was the sharpest contraction seen in 2013, the ONS said, even as housebuilders gear up to meet demand spurred by the Help to Buy scheme. But monthly data can be volatile and the longer-term picture is more positive, with production 2.2% ahead of a year earlier in November. Manufacturing output is also 2.8% ahead.